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Rent vs buy: the 10-year wealth math
Every dollar each path really costs \— including the return your down payment gives up.
X VS Y COMPARISON · MONEY · HOUSING
Rent vs Buy a Home: Which Wins in 2026?
A $450,000 home with 20% down at 7.0% vs $2,400/month rent growing 3% a year. Ten years in: buying costs $306,899.97 all-in \— down payment, closing, every mortgage payment, tax, insurance, maintenance, and the 7% you gave up by sinking cash into the house \— minus the $287,758.70 of equity you walk away with. Renting costs $331,959.72. At the defaults, buying wins by $25,059.76. But change the stay length, the rate, or the price-to-rent ratio, and the verdict flips \— run your real numbers below, then read the three branches that change the answer.
The 60-second rule
Buying wins when you stay put; renting wins when you move. At the defaults the buy path costs $306,899.97 and renting costs $331,959.72 \— buying wins by $25,059.76. But sell after only 3 years and renting wins by $30,923.95 (closing + selling costs eat the tiny equity). And at an 8.5% mortgage rate, renting wins by $29,744.78 over the same 10 years. The three variables that decide it: years you stay, the rate, and the price-to-rent ratio of your market. The calculator above prices all three.
How each side really works
Buying. A $450,000 home, 20% down, 7.0% for 30 years: the mortgage alone is $2,395.09 a month \— already within $5 of the $2,400 rent it is replacing. Then add property tax (1.1% \≈ $412.50/mo), insurance ($150/mo), and maintenance (the 1% rule \≈ $375/mo): the true monthly cost is about $3,333. Two things work in buying\’s favor over time: amortization (each payment builds equity \— $51,094 of principal over 10 years here) and appreciation ($450,000 at 3.5%/yr \→ $634,769.44). Two things work against it: the $9,000 closing and ~$38,086 selling cost (6%), and the $95,747.98 your $99,000 of cash would have earned at 7% instead of sitting in drywall.
Renting. Rent is not \“throwing money away\” \— it is buying flexibility and the market return on your down payment. $2,400 a month growing 3% a year totals $330,159 over 10 years (plus ~$1,800 of renter\’s insurance). Its costs are capped: no $15,000 roof, no property-tax reassessment, no 6% commission when you leave. In the first ~5 years renting almost always wins because almost nothing of your early mortgage payments is principal \— at 7%, the first year\’s $28,741 of payments builds only about $3,500 of equity.
The worked example, line by line
Buy path, 10 years: $90,000 down + $9,000 closing + ($2,395.09 \× 120 = $287,410.68 mortgage) + $49,500 property tax + $18,000 insurance + $45,000 maintenance + $95,747.98 of foregone 7% returns = $594,688.82 out. Walk-away equity: $634,769.44 home value \− $308,924.58 remaining loan \− $38,086.17 selling costs = $287,758.70. Net buy cost: $306,899.97.
Rent path, 10 years: $2,400/mo growing 3%/yr \→ $330,159.00 of rent + $1,800 of renter\’s insurance = $331,959.72.
Verdict at defaults: $331,959.72 \− $306,899.97 = buying wins by $25,059.76. Hot-market branch ($700k home, $3,500 rent): buying wins by $15,882.98 \— when rents are high relative to prices, buying\’s margin grows. Short-stay branch (sell after 3 years): renting wins by $30,923.95 \— transaction costs eat the ~$11k of equity you built. High-rate branch (8.5% mortgage): renting wins by $29,744.78 \— the extra ~$40k of interest erases the buy edge.
Output · formula · meaning
| Output | Formula | What it means |
|---|---|---|
| Buy total cost | down + closing + payments + tax + insurance + maintenance + foregone returns \− walk-away equity | $306,899.97 at the defaults \— the true 10-year price of owning. |
| Rent total cost | \Σ rent \× (1+g)y + renter\’s insurance | $331,959.72 at the defaults \— the true 10-year price of renting. |
| Winner and margin | rent cost \− buy cost | Buying wins by $25,059.76 at the defaults \— keep whichever side is lower. |
| Walk-away equity | appreciated value \− loan balance \− selling costs | $287,758.70 \— the check you leave with after the sale. |
Who uses this
- First-time buyers: testing whether their target market actually favors buying at today\’s rates.
- Relocators: seeing if a 2\–3-year assignment makes buying a guaranteed loss (it usually does).
- Renters on the fence: finding their personal break-even year \— the stay length where the verdict flips.
- High-rate-market buyers: checking whether waiting for a refinance is a better plan than buying now.
Accuracy & limitations
Compares total net cost over the same holding period \— the only fair way. Mortgage math is exact (standard amortization); the uncertainty is all in the assumptions: appreciation, rent growth, and the foregone investment return are guesses, so rerun with your pessimistic and optimistic numbers. It excludes income-tax effects (mortgage-interest deduction, which the higher standard deduction makes moot for many), HOA fees (add them to maintenance), moving costs, and the unpriced value of stability vs flexibility. Not financial advice.
Cite this calculatorBright Side Kit. “Rent vs Buy a Home: Which Wins in 2026?.” brightoolbox.com, 2026.
Bright Side Kit. "Rent vs Buy a Home: Which Wins in 2026?." https://brightoolbox.com/rent-vs-buy/ Accessed October 23, 2026.Frequently asked questions
Is it cheaper to rent or buy a house in 2026?
It depends on your stay length and rate more than your market. At typical 2026 numbers \— a $450,000 home, 20% down, 7.0% mortgage, $2,400 rent, 10 years \— buying wins by $25,059.76. But sell after 3 years and renting wins by $30,923.95, and at an 8.5% rate renting wins by $29,744.78. The break-even is usually 5\–7 years: shorter favors renting, longer favors buying.
What is the 5% rule for renting vs buying?
A quick sanity check from Ben Felix: compare your annual rent to 5% of the home price (roughly 3% mortgage interest + 1% property tax + 1% maintenance on an unleveraged buy). If rent costs less than 5% of the price, renting is likely cheaper; if rent costs more, buying likely wins. At the defaults: $28,800 rent vs 5% \× $450,000 = $22,500 \— rent is higher, so the rule says buy \— matching the full model.
How many years do you need to stay for buying to pay off?
Usually 5\–7 years at normal rates \— long enough that amortization and appreciation outrun the 8\–11% round-trip transaction costs (2\–5% closing in, ~6% selling out). In the default example the verdict flips to buying somewhere between year 3 ($30,923.95 rent win) and year 10 ($25,059.76 buy win).
Does the mortgage interest tax deduction change the math?
Less than most people think. The 2026 standard deduction is high enough that many homeowners \— especially without a jumbo mortgage \— get no incremental tax benefit from deducting interest. If you itemize, it helps buying; if you take the standard deduction, it changes nothing. The calculator excludes it for this reason.
Should I wait for lower rates before buying?
Waiting for rates while renting is itself a trade with a price: every year of waiting is ~$28,800+ of rent plus the appreciation you miss. Try the high-rate branch above \— at 8.5% renting wins by $29,744.78 over 10 years, so waiting can be right. But \“date the rate, marry the house\” works only if you actually refinance when rates fall.
What if my rent is much lower than my mortgage would be?
Then you are probably renting a bargain \— and the math says enjoy it. The model prices rent growth, so try your rent\’s real trajectory: a $1,800 rent growing 5%/yr catches up to a $2,400 flat-rent comparison faster than it feels. Cheap rent + investing the difference is the strongest rent argument there is.